It’s a highly disturbing, and completely shocking report. ProPublica’sJessie Eisinger and Chris Arnold of NPR claim that the government-owned mortgage company was investing in securities that paid substantially more if people continued to pay off high-interest mortgages.

At the same time, they were tightening the grip on credit, making it difficult for homeowners to refinance and get out of such mortgages.

So what was good for Freddie Mac’s bottom line was diametrically opposed to what was right for some people who had mortgages with them.

Now Freddie Mac officials claim there was a Chinese wall set up between the staffers responsible for their investments and those who dealt with credit regulations.

They deny there was any intent to manipulate credit regulations to enhance their pockets, and the investigation offered no evidence that there was.

Yet they’ve already agreed to stop making these risky investments, known as inverse floaters, after the Federal Housing Finance Agency leaned on them once the investigation became public.

Even if you buy Freddie Mac’s explanation, it doesn’t soften the blow. The conflict of interest here is unequivocal. The company is now essentially, owned by the taxpayers, and has a direct impact on who and who can not get a home loan.Continue reading→